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Debt Would Equal the Economy in 2028 With Senate Tax Cut

It has been reported that Senate Budget Committee has agreed to include reconciliation instructions allowing a tax cut of $1.5 trillion in the Senate budget resolution. This would result in debt held by the public equaling the size of the economy by 2028 and fly in the face of any fiscal goals the budget may produce on paper.

A $1.5 trillion tax cut over ten years would result in debt growing even faster than it is already expected to grow. Under current law, debt is projected to grow from a post-World War II era high of 77 percent of Gross Domestic Product (GDP) to 91 percent by 2027. With the tax cut, which would cost about $1.8 trillion after interest costs, debt would instead reach 97 percent of GDP in 2027 and equal the size of the economy by 2028, four years earlier than current law.

A dramatic increase in debt differs starkly from the rumored goal of on-budget balance for the overall Senate budget resolution. Achieving that goal would result in debt falling to about 71 percent by 2028, a nearly 30 percentage point difference. If the budget calls for on-budget balance but only provides reconciliation instructions for a $1.5 trillion tax cut, it is moving farther from its goal, not closer.

With debt on its current unsustainable upward path, it would be highly irresponsible to pass a large unpaid-for tax cut. It would hurt the credibility of the budget resolution to contain reconciliation instructions that are at odds with the budget's overall numbers. The Senate should pass a budget that calls for at least deficit-neutral tax reform and that makes progress on the other savings it is likely to assume.